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Do Innovation Subsidies Crowd Out Private Investment? Evidence from the German Service Sector

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  • Czarnitzki, Dirk
  • Fier, Andreas

Abstract

This paper analyses the impact of public innovation subsidies on private innovation expenditure. In the empirical economic literature there is still no common support for the hypothesis of either a complementary or a substitutive relationship between public funding and private investment. We investigate whether firms of the German service sector increase their innovation effort when participating in public policy schemes. Cross-sectional data at the firm level are used to estimate the effect of subsidization. Applying a non-parametric matching approach we find evidence that the hypothesis of complete crowding-out effects between public and private funds can be rejected.

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  • Czarnitzki, Dirk & Fier, Andreas, 2002. "Do Innovation Subsidies Crowd Out Private Investment? Evidence from the German Service Sector," ZEW Discussion Papers 02-04, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:893
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    More about this item

    Keywords

    Innovation; Public Innovation Subsidies; Service Sector; Policy Evaluation;
    All these keywords.

    JEL classification:

    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General

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